Economic Inequality in Australia between 1983 and 2010: A Stochastic Dominance Analysis

Abstract

We employ stochastic dominance (SD) analysis on Australian unit records to investigate trends in inequality and relative welfare levels in Australia from 1983 to 2010. Using both income and expenditure distributions, we found that the economy was on a steady descent towards greater inequality between 1983 and 1993, and that this was followed by a 10-year period of recovery and growth, and gradual improvements in inequality levels. The economy's path to sustainable and equitable growth carried on towards the late 2000s, but this was interrupted by the 2007-08 global financial crisis which caused income inequality levels to deteriorate. Our SD tests show that the country's tax and transfer programmes have been consistent in moderating elevated levels of inequities observed in incomes over time, particularly in periods following economic contraction. Our subgroup results also show strong evidence of long-term disparities in the relative welfare levels of male-headed over female-headed households, of households with children over those without, and of couple-parents families over their single-parent counterparts.

Labour Market Inequality in Australia

“…Income measured in 2013/14 prices. 21 Similar evidence on changes to inequality in gross income between the mid-1980s and mid-1990s is provided by Valenzuela et al (2014) using the HES and Athanasopoulos and Vahid (2003) using the Census. and transfer policies (see, for example, Harding, 1997;Barrett et al, 2000;Johnson & Wilkins, 2004;Whiteford, 2013).…”

“…At the upper end of estimated increases is the study by Greenville et al . () using the HES, where the Gini coefficient is reported to have increased by 4 percentage points (see also Valenzuela et al ., ). Other studies using the IDS have estimated an increase in the Gini coefficient of about 2 percentage points (for example, Doiron, ; Whiteford, ; Bray, ; Dollman et al ., ).…”

“…Studies using the ABS IDS and HES have found a relatively large increase in inequality after the mid-2000s. At the upper end of estimated increases is the study by Greenville et al (2013) using the HES, where the Gini coefficient is reported to have increased by 4 FIGURE 15 Inequality in Household Private and Disposable Incomes, 1981-1982to 1996-1997 percentage points (see also Valenzuela et al, 2014). Other studies using the IDS have estimated an increase in the Gini coefficient of about 2 percentage points (for example, Doiron, 2012;Whiteford, 2013;Bray, 2014;Dollman et al, 2015).…”

“… Similar evidence on changes to inequality in gross income between the mid‐1980s and mid‐1990s is provided by Valenzuela et al . () using the HES and Athanasopoulos and Vahid () using the Census. …”

Measuring Poverty and Inequality from Highly Aggregated Small‐Area Data: The Changing Fortunes of Latrobe Valley Households

“…The foregoing analysis strongly indicates that lone parenthood and joblessness have, over time, become the major threats to the economic wellbeing of children in Latrobe Valley. While these family states/conditions have long been recognised as major risk factors for children slipping into poverty in Australia in general (see, for example, Saunders et al ., ; Valenzuela et al ., ), our results provide the first solid measure of the increased economic insecurity and vulnerability of children and their families in Latrobe Valley between 1986 and 2006.…”